Downturn leading to improved prospects for ship safety

Jerry Frank - Friday 20 March 2009

THE GLOBAL shipping downturn is leading to a reduction in maritime accidents and improved prospects for safety sea, according to the International Union of Marine Insurance. 

Early signs have emerged from marine insurance data that the freight market crash is lifting some of the intense operational pressure exerted in recent years on the world fleet. 

An initial casualty count gathered by IUMI for 2008 indicates that losses at sea will be down by around 10% from the height of the shipping boom in 2007. 

IUMI, in its first snapshot of 2008, has suggested that the seatrade slump has brought an overall reduction of shipping casualties. 

IUMI president Deirdre Littlefield said: “Our statistics indicate that the 2008 casualty experience is going to result in a softer landing. If so, it will be good news for shipping and good news for underwriters.” 

The reduced number of ships in operation and an increasing amount of tonnage heading for scrap are other market factors that have eased pressure on ship safety. 

Ms Littlefield said there were strong signs that the safety culture at sea was taking root. But she warned: “Ship operators are being buffeted from all sides in the growing economic crisis. But to cut corners on maintenance or training can only have one result in the long term: more casualties, higher claims on insurers, and higher premium and deductible levels for shipowners.” 

IUMI has reported that “at this early stage” the number of total losses for 2008 was down to 74 from 82 at the same point last year. 

Data shows that the improved picture for 2008 is even more marked if casualties are viewed in terms of tonnage, with losses down so far to 22% from a year earlier to 372,000 gt. 

IUMI facts and figures committee chairman Cédric Charpentier said that the fall in vessels and tonnage lost could be seen in “even sharper” relief if viewed in relation to the huge growth last year of the world fleet. 

IUMI reported that a normal trend of late reporting figures could bring the 2008 total to 470,000 gt, which would be the second best year in the period 1980-2008. 

However, final statistics for 2007, when ships and crews were worked flat out to meet global demand, have now confirmed that there were 106 total losses compared with 92 in 2006. 

The marine underwriter’s representative body has been vocal about a direct link between demand for shipping services and a scarcity of experienced crew and, particularly, maritime accidents and claims. 

IUMI said that the total losses spike in 2007 had followed three years of improved figures, bringing the level back to high levels of vessel casualties in 2003. 

Although the insurance figures showed that losses in terms of tonnage were at a corresponding high level in 2007, the total fell to 600,412 gt from 720,669 gt a year earlier. 

A full reflection of the extent that the global economic crisis in the second half of 2008 has eased demand on shipping will not be in place until underwriter’s issue their findings this time next year. 

However, Mr Charpentier said that the final figure for 2008, if late reporting factors and patterns are applied, would be around 95 total losses. 

“There is reason to be somewhat optimistic,” he added. “These figures are roughly comparable to the 2006 and 2005 years.” 

Underwriting statistics for serious or partial losses in 2008 are more mixed, with 748 incidents recorded so far over the 12-month period down from 975 a year earlier. 

Mr Charpentier said the 2007 figure for these partial losses was “staggering”. 

The final figure for 2008 could approach 800 and would still be historically high compared with 247 incidents reported in 1998 to 515 in 2005, he added. 

Machinery damage continues to be the primary cause of major serious losses, representing around 35% of the number of incidents over the past five years, followed by collisions (26%) and groundings (22%). 

IUMI’s figures also indicated that cargo insurers, which account for around 50% of all marine insurance premiums, are suffering a major reverse of fortunes. 

Mr Charpentier, who is also a chief cargo underwriter with AXA Corporate Solutions, said that after a number of exceptional years the 2009 outlook was looking “scary”. 

Moreover, underwriters themselves face a near-collapse in investment income, together with a dramatic fall in premium income from the crash in fleet values and cargo volumes, which will wipe out any gains from reduced claims. 

Preliminary IUMI data shows losses at sea have fallen in 2008 as operational pressures ease
Send to Colleague Printer Friendly Format Email the Editor